April 03, 2019

PRA proposed (CP7/19) amendments to its expectations from firms investing in equity release mortgage portfolios. These amendments are related to Chapter 3 of the supervisory statement SS3/17 on matching adjustment under Solvency II and have been set out in the Appendix to CP7/19. The proposals aim to provide additional clarity on how PRA expects firms to conduct the Effective Value Test (EVT). The consultation closes on July 03, 2019 while the proposed implementation date for these amendments is December 31, 2019. Also published was a letter—from David Rule, the Executive Director of Insurance Supervision—highlighting key factors associated with the consultation.

CP7/19 is relevant to the insurance and reinsurance companies holding equity release mortgages. SS3/17 presents an EVT to help PRA determine whether firms appear to be taking inappropriately large matching adjustment benefit from the restructured equity release mortgage held within the matching adjustment portfolios. Earlier, in December 2018, PRA had revised SS3/17 to clarify its expectations about how firms could perform the EVT, with this policy taking effect from December 31, 2019. The policy statement PS31/18, which was issued alongside the revised SS3/17, noted that PRA would consult in 2019 on additional proposals. CP7/19 is now addressing these proposals, which are on the following topics:

  • Review and update of the deferment rate and volatility parameters
  • Treatment of assets other than equity release mortgages held by the special purpose vehicle used to restructure equity release mortgages
  • Treatment of equity release mortgage loans where the amount of principal and/or accrued interest at a given future date is uncertain
  • Frequency with which EVT would be assessed
  • Principles for assessing equity release mortgage risks in internal model Solvency Capital Requirements

 

Related Links

Comment Due Date: July 03, 2019

Effective Date: December 31, 2019 (Proposed)

Keywords: Europe, EU, Insurance, Solvency II, Equity Release Mortgage, CP7/19, Matching Adjustments, Effective Value Test, PRA

Related Articles
News

FSB to Evaluate Effects of Too-Big-To-Fail Reforms for Systemic Banks

FSB is seeking feedback as part of its evaluation of the effects of the too-big-to-fail reforms for banks.

May 23, 2019 WebPage Regulatory News
News

APRA Releases Minor Changes to Reporting Standards on SA-CCR for Banks

APRA released minor changes to the three reporting standards for the standardized approach for measuring counterparty credit risk exposures (SA-CCR).

May 22, 2019 WebPage Regulatory News
News

APRA on Industry Self-Assessments into Governance and Accountability

APRA released an information paper analyzing the self-assessments performed by 36 of the country’s largest banks, insurers, and superannuation licensees in response to the final report on the Prudential Inquiry into the Commonwealth Bank of Australia (CBA).

May 22, 2019 WebPage Regulatory News
News

PRA Consults on Maintenance of TMTP Under Solvency II

PRA published a consultation paper (CP11/19) that sets out its approach to update supervisory statement (SS6/16) on maintenance of the transitional measure on technical provisions (TMTP) under Solvency II.

May 22, 2019 WebPage Regulatory News
News

APRA Proposes to Amend Guidance on Residential Mortgage Lending

APRA is consulting on revisions to the prudential practice guide APG 223 on residential mortgage lending in Australia.

May 21, 2019 WebPage Regulatory News
News

IASB Proposes Improvements to IFRS 9 and IFRS 16

IASB published the exposure draft ED 2019/2 that proposes amendments to four IFRS standards, including IFRS 9 on Financial Instruments and IFRS 16 on Leases.

May 21, 2019 WebPage Regulatory News
News

Denis Beau of BDF on Supervisory Priorities for Climate-Change Risks

Denis Beau, the First Deputy Governor of BDF, delivered opening remarks at the BCBS-BSCEE-FSI High-level Meeting for Europe on banking supervision.

May 21, 2019 WebPage Regulatory News
News

ISDA CDM to be Deployed for UK Digital Regulatory Reporting Pilot

ISDA announced deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the UK FCA, BoE, and participating financial institutions in testing phase two of the Digital Regulatory Reporting pilot for derivatives.

May 21, 2019 WebPage Regulatory News
News

MAS to Consolidate Regulation of Merchant Banks Under Banking Act

MAS published a consultation paper that proposes to consolidate the regulation of merchant banks under the Banking Act and to move merchant banks to a licensing regime under the MAS Act.

May 21, 2019 WebPage Regulatory News
News

ESAs Amend Technical Standards on Mapping of ECAIs Under CRR

ESAs published a second amendment to the implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs) for credit risk under the Capital Requirements Regulation (CRR).

May 20, 2019 WebPage Regulatory News
RESULTS 1 - 10 OF 3118